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Question:

Is a retirement plan an exempt asset in chapter 7 proceedings in California?

Answer:

Under California's bankruptcy laws, a Chapter 7 filing allows certain asset exemptions based on the individual's financial situation, income and the value of the listed property and assets. California utilizes the "means test" which determines an individual's eligibility to file Chapter 7. If an individual passes the means test, his or her property will be categorized as either exempt or non-exempt. Non-exempt assets must be surrendered to the bankruptcy trustee. However, the individual is allowed to retain exempt property.

The determination of exempt property and assets in a California Chapter 7 filing is dependent on their assessed value as well as your financial circumstances. California uses two asset valuation formulas to calculate whether property and assets will be considered exempt or non-exempt. Both formulas are based on the $100,000 homeowners' exemption but vary in terms of the valuation of other assets and property.

Common California Exemptions

California's bankruptcy laws allow a Chapter 7 exemption for a variety of personal property items that include the following:

homestead

vehicles

furnishings

personal effects

jewelry

social security payments

tools of your trade

retirement plans

in-force life insurance

personal injury awards, etc.

Each asset exemption formula presents different valuation caps in its respective personal property category. A Chapter 7 bankruptcy can help save your primary residence if a foreclosure proceeding is in progress or about to be initiated against you. Filing for Chapter 7 automatically stops any foreclosure proceedings which will allow you extra time to catch up on any missed payments.

Additionally, annuities such as social security benefits and retirement plans are exempt from the bankruptcy estate.

Talk with an experienced bankruptcy attorney to discuss your situation.